1. POST-BUDGET 2010-11 Sectoral Impact GUINESS SECURITIES LIMITED

2. Budget In General The Union Finance Minister delivered his budget along the expected lines giving effect to a partial roll back of the fiscal stimulus, reliefs on personal tax front, boost to education and healthcare sectors along with maintaining the thrust on infrastructure development. The problem of fiscal deficit has also been paid adequate attention. While fiscal deficit is estimated to be 6.9% of GDP in FY10, it is expected to come down to 5.5% and 4.8% of GDP in FY11 and FY12 respectively. The deficit during FY11 would work out to Rs.381,408cr and the government would need to borrow about Rs.345,010cr to fund expenses. The Government hopes to implement direct tax code from April 2011 and the general sales tax in April 2011. Government will raise Rs.25,000cr from divestment of its stake in state-owned firms. The Kirit Parekh report on fuel price deregulation will be taken up by Petroleum Ministry in due course. Government has decided to set up apex-level Financial Stability and Development Council. Much to the delight of the common man, the Government has pruned the Personal income Tax Rates. The new rates would be the following: Income up to Rs1.6 lakh — nil Income above Rs1.6 lakh and up to Rs5 lakh — 10% Income above Rs5 lakh and up to Rs8 lakh — 20% Income above Rs8 lakh — 30% Additional deduction of Rs20,000 allowed on investment in long-term infrastructure bonds for income-tax payers; this is over and above Rs1 lakh on savings instruments allowed already. In its attempt toward rolling back the fiscal stimulus in an phased manner, the Government has increased excise duty and custom duty on certain products while keeping the service tax unchanged.

3. Agriculture & Related Sectors POSITIVE Measures AnnouncedImpactCompanies Impacted Introduction & implementation of nutrient-based subsidy, direct transfer of subsidy to farmers from 01.04.11 This would ensure that the farmers are actually benefited. Nutrient-based subsidy would reduce volatility of subsidy. Chambal Fertilizers, RCF, Coromandel International, Provide project imports status at a concessional customs duty of 5 per cent with full exemption from service tax to the initial setting up and expansion of Cold storage, cold room including farm pre-coolers for preservation or storage of agriculture and related sectors produce and Processing units for such produce. This will encourage new Greenfield investment in the fertilizer sector and hence will have a positive effect on the sector. This will also have a positive impact on companies who are in the business of processing agro products Gujarat Narmada Valley Fertilizers, Deepak Fertilizers & Petrochemicals, Provide central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax, to the storage and warehousing of their produce Positive for companies who are in the business of processing agro products like basmati rice REI Agro, Kohinoor Foods, Karuturi Global Exempt the testing and certification of agricultural seeds from service tax. Beneficial for players producing hybrid seedsAdvanta India, Kaveri Seed, United Phosphorous, Monsanto

4. Auto & Auto Ancillaries NEUTRAL Measures AnnouncedImpactCompanies Impacted Excise duties raised from 8%-10%Negative. Companies shall pass on the duty to the customers. Demand likely to affected for MUV’s Maruti, Tata Motors, Hero Honda, Bajaj Auto. Weighted Deduction on Research and Development Initiatives enhanced from 150% to 200% Positive for all the major auto companies.Tata Motors, Ashok Leyland, M&M Focus on the government on development of the rural areas and agriculture output Augurs well for the sectorTwo wheelers and tractors Increase in the Income tax slabsPositive in the long run for small cars and two wheelers due to an increase in disposal income. All manufacturers Reduction in central excise duty on latex rubber thread from 8% to 4% Positive for the tyre industryMRF, Apollo Tyres, JK Tyres, Dunlop and other major industry players. Excise duties raised from 8%-10%Negative for all auto ancillariesExide, Sona Koyo

5. Banking & Finance POSITIVE Measures AnnouncedImpactCompanies Impacted Recapitalization plan for the PSU Banks – an additional amount of Rs.1200cr was infused in FY10. This will increase to Rs.16500cr during FY11 This is expected to improve the financial health of PSU Banks and help them achieve a minimum Tire I capital to Risk Weighted Asset Ratio of 8% keeping in line with international Basel-II norms. SBI, UBI, Bank of Maharashtra, PNB RBI is considering giving some additional banking licenses to private sector players. NBFCs would also be considered if they meet eligibility criteria This will facilitate the entry of more private sector players into the banking sector thereby increasing the efficiency and quality of service. Private sector banks Extension of the repayment period under the Agricultural Debt Waiver & Debt Relief Scheme from Dec’09 to June’10. Incentive of additional 1% interest subvention to farmers who repay short-term crop loans as per schedule, increased to 2% for 2010-11. This would help the banks to reduce NPA and recover larger part of their advances. Indian Bank, PNB, BoB Besides contribution to Health Insurance schemes which is currently allowed as a deduction under the income tax act, contributions to the Central Government Health Scheme has also been allowed as a deduction under the same provision This would be beneficial to the investors and the players as well. The investors would benefit in terms of tax savings and the players would benefit in terms of higher demand for their products SBI, Reliance, Dena Bank, IDBI Bank, HDFC Bank, Axis Bank

6. Consumer Durables POSITIVE Measures AnnouncedImpactCompanies Impacted Basic customs duty on one of key components in production of micro-wave ovens, namely magnetrons, reduced from 10% to 5%. It will help to reduce cost of production and boost profitability. Consumers can also benefit in terms of reduced prices. Godrej Consumer Products, Central Excise duty on LED lights reduced from 8% to 4% at par with compact florescent lamps It reduces the prices of the products to the customers and help to increase demand. Phillips, MIC Electronics Reduction in central excise duty on replaceable kits for household type water filters other than those based on RO technology to 4% It reduces the prices of the products to the customers and help to increase demand. HUL, Bajaj Electricals

7. Cement NEUTRAL Measures AnnouncedImpactCompanies Impacted Setting up a coal regulating authorityThis will help to reduce volatility in coal prices.ACC, Gujarat Ambuja, Grasim, Ultratech. Excise duty on cement and cement clinker increased Negative as all companies might not be able to pass it on to the consumers due to falling operating rates following significant amount of capacity addition The companies having their base in the south shall be affected more like Dalmia and India Cements Continued focus of the government on infrastructure development Positive. The focus on infrastructure development undoubtedly translates into increase in demand for cement Companies having their presence in northern regions likely to benefit more.

8. FMCG & Food Processing POSITIVE Measures AnnouncedImpactCompanies Impacted Rapid Implementation of GST (Goods & Service Tax)Positive. This will replace the multiple indirect taxes currently levied on FMCG products which will ultimately help to reduce prices. ITC, Dabur, Emami Service Tax at the same levelPositive for FMCG companies since it will not make services like advertising more expensive to avail Colgate- Palmolive Increase in MAT from 15% to 18% of book profitsNegativeHUL Concessional import duty to specified machinery for use in the plantation sector to be extended up to 31.3.11 along with a CVD exemption Positive. Beneficial for Indian tea industryMcLoed, Tata Tea Excise duty on Cigarettes and on other forms of tobacco increased Temporarily negative. In the long run demand will not be adversely impacted ITC Enhancement of Income Tax SlabsPositive as will increase the disposable income in the hands of the consumers All companies Reduction in excise duty on goods covered under the Medicinal and Toilet Preparations Act from 16% to 10%. Positive. This will help to reduce the prices of health and personal care products and increase their demand. Dabur, HUL, Emami, Marico ECB's made available to food processing sector. Easy access for funds to marine and cold storage facilities Positive for the food processing industry producing dairy products, biscuits etc Nestle, Britannia Thrust on infrastructure development & focus on rural economy Positive since the rural sector provides considerable scope due to low penetration. All Companies

9. Gems & Jewellery POSITIVE Measures AnnouncedImpactCompanies Impacted Basic customs on Rhodium – a precious metal used for polishing jewellery reduced to 2% Positive for producers of gold jewelleryRajesh Exports, Gitanjali Gems, Flawless Diamond, Shrenuj & Co., Basic customs duty on gold ore and concentrates reduced from 2%t ad valorem to a specific duty of Rs.140 per 10 grams of gold content with full exemption from special additional duty. This augurs well for the sector especially gold jewellery manufacturers Vaibhav Gems, Goldiam International, The excise duty on refined gold made from such ore or concentrate reduced from 8% to a specific duty of Rs.280 per 10 grams Beneficial for the sector especially gold jewellery manufacturers Surcharge on companies reduction from 10% to 7.5%This will help to reduce tax outgo of the industry participants. All companies Increase in customs duty on gold and platinum from Rs.200 per 10 grams to Rs.300 per 10 grams; and on silver from Rs.1000 per kg to Rs.1500 per kg. Negative. Prices of gold and silver jewellery will increase All players

10. Hotels POSITIVE Measures AnnouncedImpactCompanies Impacted Introduction of tax holidaysPositive since tax incentives increase bottomline.For all industry players Service tax rates unchangedNo effectAsian Hotels.Bhagawati Banquets, Royal Orchid Hotels Granting investment linked deduction to new hotels with two stars category and above Beneficial as it provides impetus to the tourism sector. It will enable the industry in capacity addition in the form of new rooms. EIH, Taj GVK, Indian Hotels, Hotel Leela Ventures,

11. Infrastructure & Power POSITIVE ExpectationImpactCompanies ImpactedMeasures AnnouncedImpactCompanies Impacted Focus on rural and urban development schemesBeneficialAll companies Capital outlay of Rs.173552cr for infrastructure development in FY11 Beneficial as it encourages more participation by the industry players Nagarjuna Constructions, IVRCL Infra, L&T, Punj Lloyd, Patel Engineering, Increase in allocation for road transport from Rs.17520cr to Rs.19894cr Will benefit the players who concentrate on road development projects Punj Lloyd, Gammon India Clean energy cess on imported and domestic coalIncreases operating costJaypee Hydro Higher allocation of fund to the power sector doubled from Rs.2230cr in 2009-10 to Rs.5,130cr in 2010-11 BeneficialCESC, NTPC, RE Power, Reliance Power, NHPC, Adani Power, Increased focus on renewable sources of energy with an increase of 61% from Rs.620cr in FY10 to Rs.1,000cr in FY11 BeneficialNHPC, Monnet Ispat, Suzlon Provide a concessional customs duty of 5% to machinery, instruments, equipment and appliances etc. required for the initial setting up of photovoltaic and solar thermal power generating units and also exempt them from Central Excise duty BeneficialWebsol Energy, Moser Baer

12. IT & ITES NEUTRAL Measures AnnouncedImpactCompanies Impacted Increase in MATNegative for the sector since MAT in the present form causes additional tax burden for the companies. Wipro, Infosys, Tech Mahindra Process of refund of accumulated credit to exporters of services, especially in the area of Information Technology and Business Process Outsourcing, made easy bymaking necessary changes in the definition of export of services and procedures. Positive as it reduces ambiguities and complications related to tax filings MphasiS, Mahindra Satyam, Polaris Software, Education outlay increased by Rs.3236cr & Rs.3675cr grant on education to states Positive for IT companies providing educational services Educomp Solutions, Aptech, NIIT Surcharge on companies reduction from 10% to 7.5%Positive for the sector since it will reduce tax outgoAll companies Clarity on SEZ deduction for earlier yearsPositiveAll companies No extension of STPINegativeInfosys, Wipro

13. Oil & Gas, Refineries NEUTRAL Measures AnnouncedImpactCompanies Impacted Decline in subsidyThis would mean a move towards de-regulating the pricing of petroleum products. Prices of products would go up considerably. OIL, BPCL, ONGC, RNRL, Reliance Industries, Exemption of Oil & Gas profits from MATPromote mineral oil exploration and production sector as also will prove positive for the refinery businesses. MRPL, Cairn India, ONGC Videsh, Surcharge on companies reduction from 10% to 7.5% Positive for the sector since it will reduce tax outgoAll companies Restore the basic duty of 5% on crude petroleum; 7.5% on diesel and petrol and 10% on other refined products. Central Excise duty on petrol and diesel enhanced by Re.1 per litre each. Negative for the general public as this will translate into higher prices not only for the fuels but also for public transportation All companies Customs duty of 5% & Hike in CET for refined products Negative for OMCsIOCL, OIL, BPCL

14. Pharma & Healthcare POSITIVE Measures AnnouncedImpactCompanies Impacted Increase of deduction on account R&D from 150% to 200% Is likely ease this pressure by allowing for increase in allocation to this segment. Reduction of duty on life saving drugs will upgrade manufacturing and research capabilities. Ranbaxy, Divis Labs, Dr.Reddy’s Labs, Aurobindo Pharma, Biocon Full exemption currently available to medical equipment and devices such as assistive devices, rehabilitation aids etc. retained. Positive for the healthcare sectorFortis Healthcare, Apollo Hospital, Dabur Surcharge on companies reduction from 10% to 7.5%It will reduce tax outgoAll companies

15. Real Estate & Housing POSITIVE Measures AnnouncedImpactCompanies Impacted Increased Allocation for urban & housing development. Indira Awas Yojana: allocation up by Rs.10,000cr This will help the Government to move closer towards achieving “Shelter-for-All” objective. DS Kulkarni Developers, Unitech, DLF, Scheme of one per cent interest subvention on housing loan upto Rs.10 lakh, where the cost of the house does not exceed Rs.20 lakh extended up to March 31, 2011. This will lead to higher demand not only for housing but for housing loans as well. HDFC, LIC Housing Finance, DLF, BSEL Infra, Rs.1,270cr allocated for Rajiv Awas Yojana as compared to Rs.150cr last year This will help bring shelters over more heads and will help to address the problems arising due to housing shortage. This will increase the demand for affordable houses. DLF, Ansal Housing, Ansal Properties, HDIL, Lok Housing Allow pending projects to be completed within a period of five years instead of 4 years for claiming a deduction of their profits Positive as it provides a one time interim relief to Housing and real estate sector All players

16. Retail POSITIVE Measures AnnouncedImpactCompanies Impacted The Government will very soon address the issue of opening up the sector This development shall speed up the growth of the organized formats in the country leading to lowering of prices, improving the quality of products and widening the choice of products available to consumers. Permitting ECB for the sectorLiberalisation of ECB policies can help the retail players in augmenting their funding requirements. Vishal Retail, Trent, Outright exemption from special additional duty provided to goods imported in a pre- packaged form for retail sale. Positive for the retailersPantaloons Retail, Shoppers Stop, Reduction in central excise duty on corrugated boxes and cartons from 8% to 4% This will help the industry players by reducing the packaging costProvouge (India)

17. Steel NEUTRAL Measures AnnouncedImpactCompanies Impacted Continuous focus of the government on the infrastructure sector as mentioned before Positive in the long run.Tata Steel, Sail, Ispat Industries, Jindal Stainless, Sunflag Iron & Steel Increase in excise dutyNegative for the user industries as it will lead to an increase in prices All the major players Cess on coalNegative as it will lead to an increase in manufacturing cost All the major players

18. Telecom NEUTRAL Measures AnnouncedImpactCompanies Impacted Hike in MAT from 15% to 18%Negative since it translates into higher tax burden Bharti Airtel, Idea Cellular, RCom, Tata Service tax remains intact with an increase in the excise duty Positive for telecom operators and subscribers as there is an intense price competition in the sector which would have make it difficult for the service providers to pass it on to the users specially the pre paid customers. All the major players. Exemption of special additional duty to mobile phones imported in the pre packaged form Marginal as handsets and accessories are already available in the market at affordable rates The major manufacturers of mobile handsets.

19. Textile POSITIVE Measures AnnouncedImpactCompanies Impacted An extensive skill development programme in the textile and garment sector to be launched by leveraging the strength of existing institutions and instruments of the Textile Ministry to train 30 lakh persons over 5 years. Beneficial as it will increase the availability of skilled workers in the sector. Alok industries, Welspun Industries, Raymond, Excise duty hike on non petro products.Positive for man-made fibre industry as their main raw material is a petro product. So its price will not increase. Aditya Birla Nuvo, RIL, SRF, Nirlon Extension of existing interest subvention of 2% for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises (SME). Provides further incentive to export The minister has also proposed One-time grant of Rs.200cr to the Government of Tamil Nadu towards the cost of installation of a zero liquid discharge system at Tirupur to sustain knitwear industry. Other than helping in sustaining the knitwear industry it will also help to keep the environment clean Krishna Lifestyle The government has increased weighted deduction on expenditure on in-house R&D from 150% to 200%. The textile & clothing Industry was also granted to launch an extensive skill development programme by leveraging the strength of existing institutions and instruments of the Textile Ministry to train 30 lakh persons over 5 years. Encourages R&D and leaves considerable scope for improvement in technology. All Players

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